3.2.1 Global energy demand
3.2.2 Fuel and technology patterns
3.2.3 Achieving global climate goals
The global energy system will change in fundamental ways over coming decades. New fuels and technologies will progressively capture market share and diversify the world's energy supply. A growing and more affluent population will demand more reliable access to energy and better environmental protection, particularly reduced greenhouse gas emissions and improved air quality.
Many current challenges will persist, including entrenched global energy poverty and concerns about long-term energy security. These will continue to be key drivers in national energy policies and development decisions.
3.2.1 Global energy demand
The World energy outlook 2011, published by the International Energy Agency (IEA), modelled three scenarios based on the IEA's assessments of key parameters affecting global energy development from now to 2035 (IEA 2011a). The scenarios were the maintenance of current climate and energy policies; the successful implementation of current and announced climate and energy policy commitments (the 'new policy' scenario); and the adoption of an energy pathway consistent with keeping global warming to under 2°C (the '450 ppm' scenario).
Under all three IEA scenarios, world primary energy demand increases, although the strength of the global response to climate change will largely determine the rate of growth, particularly after 2020. In the absence of further greenhouse gas reduction measures, energy demand is projected to grow at 1.6% a year, compared to 0.8% under the 450 ppm scenario. In large part, the difference reflects the extent of energy efficiency measures implemented in each scenario (IEA 2011a:70).
However, growth in global energy demand will not be evenly distributed, reflecting broader shifts in world economic and social balances. Under the new policies scenario, non-OECD countries account for around 90% of growth in primary energy demand to 2035. China accounts for more than 30% and India about 16%. In contrast, aggregate growth across the OECD is expected to be around 8% from 2009 to 2035 (Figure 3.1).
3.2.2 Fuel and technology patterns
Changing global fuel and technology patterns will have important implications for demand for Australia's main energy exports and the speed (and cost) at which new technologies are commercialised through mass deployment.
Under the new policies scenario, the use of all fuel types expands but fossil fuels still account for more than half of the overall increase (Figure 3.2). Renewable energy expands its share of total primary energy demand, from 13% in 2009 to 18% in 2035 (IEA 2011a:79). The share of electricity generation from renewable energy grows from 19% to around 31% (IEA 2011a:175).
The Fukushima tragedy in Japan in 2011 is not expected to significantly affect the growth of nuclear generation in the medium to long term. Planned reactor decommissioning in Europe and Japan will be offset by expansion in China, South Korea and other developing countries (IEA 2011a:79).
The IEA forecasts that global oil production will continue to grow as conventional supplies are increasingly complemented by unconventional sources to meet demand. Physical production limits (so-called 'peak oil') are unlikely to be reached before 2035.
However, rising oil prices and demand-changing policies and technologies could produce a demand-induced peak in production after 2020, depending on the strength of global climate change action. Should high oil prices be sustained, substantial unconventional oil reserves, such as Canadian tar sands, are expected to enter the market, sustaining global reserves for many decades.
While oil will remain the main energy source for the transport sector to 2035, there will be increasing take-up of alternative transport fuels (Treasury 2011:62). There is also likely to be increasing electrification of transport and adoption of energy-efficient technologies (IEA 2011a).
The IEA predicts that global gas demand will grow by 55% to 2035 (IEA 2011a:156), possibly equalling demand for coal. New drilling and extraction technologies are unlocking enormous new coal-seam, shale and tight gas resources that are transforming gas (and oil) markets in regions such as North America, which may become largely energy self-sufficient over the next decade (BP 2012b). This may have important implications for global energy trade.
These trends are shown to accelerate dramatically in the 450 ppm scenario, as global use of fossil fuels (mainly coal) declines markedly while renewables and nuclear energy grow (Figure 3.3). In particular, coal use is projected to decline from 27% of the global mix to around 16% (IEA 2011a:71).
3.2.3 Achieving global climate goals
According to the IEA, securing 450 ppm or even 550 ppm global emissions outcome will require integrated energy and climate policy frameworks at the national level to reduce carbon emissions, improve energy efficiency and drive the development and deployment of new clean energy technologies (IEA 2012b).
The World energy outlook 2011 analysis (IEA 2011a) also found that:
- about 80% of the world's allowable carbon dioxide emissions under the 450 ppm scenario is already locked in because of existing infrastructure
- for every $1.00 of investment in the power sector avoided before 2020, an additional $ 4.30 would need to be spent after 2020 to compensate for future emissions
- solutions must be found from a portfolio of technologies and fuels, and the world cannot afford to limit its options
- a 10-year delay in the development of carbon capture and storage could increase the cost of achieving the 450 ppm goal by 8% to 2035
- a major reduction in the use of nuclear energy would make achieving that goal extremely challenging and impose similar costs.